What were – and are – the major drivers behind the major wealth redistribution that has occurred over 30 years across OECD countries?

The policies that delivered this massive redistribution of wealth requires a look.
In the United States it was known as Reaganomics, and in Britain as Thatcherism, after US President Ronald Regan and UK Prime Minister Margaret Thatcher.

The two powerhouse economic leaders set a course that led to an economic framework based on globalisation and underwritten by supply side economics.

In this country, the incoming 1984 Labour Government took these policies and put them on steroids. It was known here as Rogernomics, after Finance Minister Roger Douglas.

The policy foundations are known as supply side economics or trickledown economics. They are underpinned by the pillars of deregulation, privatisation of public assets, monetary control leading to low interest rates, labour deregulation – in large part the destruction of labour and unions and also lower taxes particularly for the wealthy.

The Rogernomics blitzkrieg promised a more efficient and effective delivery of state services. It offered the breakup of state monopolies so that entrepreneurial New Zealanders could dream to start their own business and become self-made millionaires.

Few people argue against major and urgent reform being necessary in the 1980sn in New Zealand. Muldoon had just about destroyed the economy as the country struggled to trade after the United Kingdom ditched us and swung towards Europe.

We didn’t exactly have equality then. Some, like farmers, got unequal amounts of government assistance.

Major reforms like we had can’t avoid negative effects, unintended consequences and collateral damage. Subsequent tweaks have to be made to limit the damage.

The argument was, once we built a more efficient and effective economy, wealth retained by the Government could be redistributed to build wealth for all New Zealanders.

The magic in this policy framework was that all New Zealanders lifestyles would lift and be so good that by the late 1990s we would be the ‘leisure society’ working four days or less a week.

I don’t remember those promises. I was too busy (very busy) working and raising a family.

So apart from tourism doing outstandingly well – which is all about the race to the bottom
in importing cheap labour to make coffee and serve tables – dairy, beef lamb, fish and forestry are still a significant backbone of the New Zealand economy, even after trickledown.

People that have done extraordinarily well out of the trickledown of course love the status quo and likely have a say over their 40-hour employment contract, and earn enough to feed, clothe, educate and house their families.

While we have low employment, we have thousands of New Zealanders on low incomes who are underemployed because to be efficient and effective you must ensure as the trickledown starts its downward spiral, less and less gets through to the bottom.

That sounds like nonsense – the keeping people poorer to stay richer fallacy.

We do have one type of inequality that’s growing – the inequality of Working for Families that redistributes money from workers without dependent children to everyone with children, including many quite well off people.

So this article has nothing to do with decrying those who work hard and earn a lot. It has everything to do with asking the questions. What sort of society or country do you want to live in? Are you comfortable seeing fellow Kiwis on Struggle Street sleeping in cars and under hedges? And are you comfortable making significant profits, having the whip hand over wages, hours, conditions and therefore the livelihood of your fellow citizen.

What about: Are you comfortable taking significant financial risks and working your arse off to provide jobs?

We’ve seen a major collapse in integrity and credibility in business leadership in this country, whether it was the collapse of the finance houses or whether it was the captains of industry who sat on the district health boards and pretended that everything was okay. That wages for nurses were good and that buildings that housed patients were fit and healthy for purpose.

While there have always been examples, have we really had “a major collapse in integrity and credibility in business leadership”?

We all know differently. We know that in every sector of our community, the great underwrite for this country was that everyone was able to have a fair go. I’m not sure that is the situation.

A fair go can only exist in an open, transparent society. The only institution that can reassert a fair go is the New Zealand Government.

Excellent article, which does a good job of highlighting the fact that inequality is not a partisan issue. The financial deregulation of the 1980s (“Rogernomics”) was a Labour government initiative, and National has spent the best part of the last decade promoting it.

Now, after 30-odd years, we’re all running around looking for someone to blame for the results, but what we really need to do is take a look in the mirror and ask ourselves some serious questions about how we let things get to this point, and what we can do to fix it. Witch-hunts are incredibly unproductive.

And:

That last sentence is important I feel. The previous government took things to the penultimate point and tried to use industry and capitalism to fix all society’s problems (health, housing, corrections, education) which was an abysmal failure.

Capitalism is awesome and a fantastic system in many ways, but it cannot fix all problems and cannot entiry self regulate. So the problems now are far to big for any industry sector to tackle and require significant government intervention. To those who argue against this…well why did you (yes you) let things get so bad under the system of the last 30 years. There was ample opportunity to ensure fair distribution of societal gains to prevent the current disaster in mass inequality, but humanity is selfish by design and needs to be checked.

There have been failures for sure, but have things overall been ‘an abysmal failure’?

26 Comments

David

Tamihere should ask himself if he would be better off if had been born in 1860 if todays world is so awful, we have never been richer or had this quality of life ever in human history. Ironically he probably wrote that article from his million dollar mansion before he gets in his 120k truck to go to his 250k a year job without actually having the brains to link where his income comes from.

Grimm

It comes from the government. The truth is he and quite a few other Maori elite have done extremely well off the back of massive government funding supposedly to close the gaps. Now he’s bitching about the gaps.

Anyone that talks about “trickle down” as if it’s some economic theory from the right, instead of a strawman from the left, just deserves derision for having no clue.

Blazer

Alan Wilkinson

There was no redistribution of wealth. There was an opening up of opportunities for new wealth and some people took them. Their wealth mostly did not come from others although some people in make-work jobs lost them in rationalisation and competition. Most of the issues arose in the retention of monopoly status during transfer from public to private ownership.

I didn’t enrich myself at anyone’s expense, except maybe larger competitors. I manufactured my product, marketed it, sold it to customers who wanted it. They wanted it because the price point was competitive and they found it not only served their purpose it enhanced their lives in some way.

PartisanZ

PartisanZ

Firstly, David, in your “born in 1860” analogy you’ve got a really good argument there for not critiquing anything at all about our present-day society and not doing anything about our present-day issues and problems …

It’s “all good” basically, except if you are suspected of riding the pig’s back of “Maori privilege” …

Alan reckons its “all good” too … or so it seems … If only dear Rogered had been allowed to finish his work …

To paraphrase: There certainly was redistribution of wealth and, perhaps to a greater degree of earning potential. There was a highly orchestrated opening up of ‘opportunities’ for some selected people to create “new wealth”, very often in considerable part from slashing employment in the public assets they were ‘sold’ at bargain basement prices … Their wealth absolutely did come from others … that’s where all wealth comes from … In very small part some issues arose in the retention of monopoly status during the highly unethical transition from public to private … but these were nothing compared to mismanagement and asset stripping …

Gezza

Describe what productivity is in your view & what impact the denand for continued productivity improvement according to your preferred model has on jobs for particular existing sectors & products.

I ask because I think there must practical limits beyond which continued productivity improvements in a globalised economy must simply reduce wages & /or destroy jobs & eventually the product simply ends up being sourced from the cheapest labour market overseas. Which shifts as low paid skilled workers there begin to demand decent wages, & manufacturers just go looking for the next poor developing country to exploit.

Something Trump has moved to fix with interventionist policies.

Alan Wilkinson

Yes, increased productivity may mean job losses in that area but makes opportunities for higher quality outputs in other areas. This has driven jobs from agriculture to manufacture to services. It’s hard to argue that this has reduced the quality of life for employees.

Gezza

Service jobs tend to be even lower paid than msnufacturing jobs are, & globalisation of immigration leads to importing cheap foreign labour to cater to target tourist & restaurant markets driving wages down or stopping them from rising there too. This wouldn’t be a problem if the top end was equally losing money, but it isn’t – the reverse is happening. Gross inequalities in societies & powerlessness for the disenfranchised to do anything about it is a recipe for ructions.

Alan Wilkinson

Alan Wilkinson

Gezza

The relative importance of service in a product offering. The service economy in developing countries is mostly concentrated in financial services, hospitality, retail, health, human services, information technology and education. Products today have a higher service component than in previous decades. In the management literature this is referred to as the servitization of products or a product-service system. Virtually every product today has a service component to it.

How many highly-paid jobs in those service economy categories do you think redundant factory workers or closed down retail outlet workers would be moving into?

Blazer

wooden goat

There will *always* be “inequality” in society. It’s the result of the funny old place we live in called the “real world” where people are born into different families (rish, average, poor), have different parents (good, average, bad), different skills, abilities and motivation-levels.

If anyone believes that ever-increasing government handouts can “fix” inequality then I have a bridge I can sell you.

How much *more* money do taxpayers need to pay before every problem leftists whine about is “fixed”? What happened to those nasty old concepts of self-reliance and self-responsibility?

How much more money will be “enough”?

On the subject of taxation, here is the oh-so-nasty and oh-so-controversial Stefan Molyneux on “taxation is theft”.
Leftists and those against free speech should avert their eyes now…..

PartisanZ

Angry, angry man huh? Sure to whip a crowd of Righties into a frenzy …

He’s sort of half-way correct, in a relatively unintelligent sort of way. Ultimately I reckon he’s conflated “vested interest governance” with (theoretically) freely elected bureaucratic government and its revenue raising mechanism, taxation … There’s even less thought for the other side of the tax coin … transfer …

Government, anyhow, becomes the hate object.

The War on Drugs is a perfect example. It’s morally wrong, sure, as dictated by vested interests, but wanting your children protected from illicit drug dealers isn’t morally wrong … (indeed, one might nowadays include legal drug dealers in that?) …

Even if a Rightie is against “the war” or “all wars” they will inevitably want their nation to have a defense force, which must be paid for somehow … and indeed, many Lefties may fall into this category too?

So ‘The Molyneux Way’, which is presumably minarchy, can no more be applied universally than vested interest ‘democracy’ like we have today …

I withdraw my support from The War on Drugs and from “educating other peoples’ children” as well?

Governments are theoretically designed to “reason about it”. Consequently, yelling that no-one is reasoning about it – and concurrently making ‘loaded gun’ allusions not really applicable to Canada – is rather pointless … I’d say he’s playing to the American survivalist movement mostly …

Stand for Parliament man! Get yourself elected and DO something about it?

What would that look like? A lengthy ballot paper upon which I chose to support or oppose – allow or prevent – my taxation being used issue by issue? Drugs NO. Education YES. Health … YES & NO … How many people would simply grasp the opportunity to pay zero tax?

Or zero taxation … user pays for everything … and a full-blown Charitocracy taking care of all downsides? Social security by popular cause … a kind of societal beauty contest …